I am the US Business Editor of the Telegraph newspapers and website. Based in New York since August 2007, I've had a ring-side seat for the near-downfall of Wall Street, and the US recession. Here I hope to dig a little deeper, highlighting stories that are less mainstream, as well as writing about the lighter side of life in the Big Apple.

Is Tim Geithner tough enough to handle America's banks?

Remember the AIG bonus furore? It was mid-March, the global economy was in the depths of recession, and AIG – the insurer American International Group that once sponsored Manchester United – revealed that it was on the verge of paying $165m in bonuses to staff at the division responsible for its spectacular near-collapse just six months earlier.

What followed was one of the biggest witch hunts since Salem, with bus tours organised to the leafier parts of Connecticut to allow disgruntled US taxpayers – who’d backed AIG to the tune of more than $180bn at one stage – to wave pitchforks and vent their anger.

But what you may not remember was that at the same time, AIG made $105bn of payments to major US and European banks who were on the other side of credit default swaps (CDS’s) or contracts with the insurer.

The recipients included everyone’s favourite ‘vampire squid’ Goldman Sachs, which received $12.9bn, as well as a number of banks closer to home including Barclays, which received $7.9bn.

At the time AIG’s explanation for the payments was that they needed to be made in the normal course of business to counterparties.

Thankfully Neil Barofsky, the inspector-general of the US Treasury’s $700bn Troubled Asset Relief Programme(TARP), has revisited the episode.

His just-released report into the matter makes interesting reading – especially when it comes to the role of Tim Geithner, now Treasury Secretary, but formerly the head of the Federal Reserve Bank of New York which led the negotiations with AIG late last year.

Mr Barofsky paints a rather withering picture of Geithner, claiming that rather than bargain with AIG’s counterparty banks to cut the value paid on the various derivatives contracts, his team ended up coughing up 100 cents on the dollar.

At one point UBS, one of the banks involved, agreed to take a hair-cut on the amount owed to 98 cents on the dollar but others, including Goldman objected, the report reveals.

The report goes on to say that such payments were “far above their market value at the time” and that “there is no question that the effect of the Fed’s decisions…was that tens of billions of dollars of government money was funnelled inexorably and directly to AIG’s counterparties.”

In total, $27.1bn of money from the US taxpayer was transferred to banks that did business with AIG, the report found.

Six months in the making, Barofsky concludes that Geithner just wasn't tough enough with the big banks, saying ‘the refusal of the Fed to use their considerable leverage as the primary regulatory for several of the counterparties….made the possibility of obtaining concessions from those counterparties extremely remote.”

Mr Barofsky’s report paints Geithner to be somewhat weak even though he and the Fed’s lawyers deny that was his intent.

Barofksy’s findings, which are now with the Fed and the Treasury, cannot change what happened earlier this year.

But they do beg the question that if the man running the world’s largest economy did not appear to have the appetite to stand up to the big banks when he effectively had them over a barrel, what are the chances of him doing so in the future?

Geithner, after all, is charged with building the new regulatory framework for the US financial sector. What America needs is strong, well-thought out regulation that will ensure those in the banking sector cannot repeat their errors. Barofsky's report suggests Geithner may not be the man to deliver it.